The three ages of fintech – past, present, future

Sometimes bad things happen in threes, but that can go for good things too.  Fintech has brought us mobile banking, contactless payments, online shopping, invisible payments and more choice. But the industry is shifting focus and a new age of fintech is dawning.

The first age of fintech

Technology first started playing a role in finance in latter half of the 1800s when a pantelegraph was used to verify signatures in banking transactions. Progress from then on was a little slow but things really picked up second half of the 20th century. Barclaycard - for example - launched the UK’s first credit card back in 1966 and then went on to launch a series of UK firsts, including the corporatecredit card, electronic payments, contactless and payment wearables.

The first age of fintech really began to change in the latter half of the noughties. Contactless and mobile technology gave consumers more ways to pay, more products to choose from, more choice in how they lived their lives. All this was enabled by emerging technologies, in particular, smartphones.

From 2010 onwards, fintech started to become a competitive space. Smaller start-ups began to proliferate and competition was fierce. Big players today like TransferWiseCurrency CloudDueDil and Nutmeg all had their origins around this time.

Devie Mohan is an influential writer, speaker and global expert in all things fintech. She is also the co-founder and CEO of research and data provider Burnmark.

Susanne Chishti is the CEO of FINTECH Circle Institute, an industry commentator for CNBC, and co-editor of bestseller The FINTECH book.

Devie Mohan explains: ‘The first stage was all about competition, lots of start-ups competing in once fairly limited space: B2C.’

This was a time of harnessing new technologies to offer consumers something different. While this competition is by no means over, new trends are emerging….

The second age of fintech

While small and large businesses continue to innovate for consumers, it’s in the B2B space that most of the opportunities are emerging. New regulations like PSD2 and GDPR are bringing a host of regulatory challenges that fintech start-ups are agile enough to find solutions for, keeping larger firms compliant and in control through partnerships and collaborations. This is because large financial institutions are increasingly taking note of the range of solutions available to them.

More than that, new developments within artificial intelligence, machine learning, big data management and blockchain technology are giving those with the right ideas an easier route towards collaborations with larger institutions. Barclays is taking advantage of a new world of partnerships with its Accelerator powered by Techstars.

Devie Mohan explains: ‘Now, we’re definitely seeing phase two, it’s all about collaboration. It’s about how we can make life easier for large companies and there’s so much cost to be saved and extra revenue to be made.’

Susanne Chishti : ‘Fintechs are going further by finding sophisticated solutions for capital markets, asset management and for the insurance industry as well. We see more deep domain expertise to solve very complicated challenges which large banks face.

‘We’re seeing the transformation of capital markets. Businesses with new fintech solutions from all parts of the value chain. We’re at the beginning of a long journey of change.’

And because so much expertise and innovation is occurring with the fintech space, ‘sub genres’ are starting to emerge. Once, very niche areas of financial technology have now become multi-million pound industries.

Devie Mohan: ‘There are now specific segments like regtech and insurtech and their revenues are growing. Many are getting more proofs-of-concept and more investment than in the B2C segment.’ 

‘In particular in London, regtech has grown so much in 2017, it’s now known as the world centre .’

So, the second age of fintech is seeing lots of start-ups and fintechs bringing their solutions to larger financial institutions. Whether it’s to add to their current product propositions, or to solve business problems, there is a level of collaboration unthinkable in the first age of fintech.

The third age of fintech

So what does the third age have in store?

Susanne Chishti : ‘I almost feel like phase three might be where the tech giants kick in and the banks actually need start-ups to compete. But they have to be creative in working together in the new ecosystem.’

And big data is expected to be a massive part of fintech’s third age.

Devie Mohan: ‘Everyone says that data is the new oil. The value associated with data is tremendous. People are beginning to see the various uses for the that through machine learning and training new algorithms to learn form out behaviour.

‘The biggest challenge will be where data is from? Where it’s going and where you’re going to use it? That’s how the ecosystem functions efficiently.

But just because B2B fintech is in it’s heyday, it doesn’t mean consumers won’t feel the impact.

Susanne Chishti: ‘In five years’ time, fintech will be a seamless experience. It’s invisible finance. You won’t know you’re paying, like with Uber, you leave the taxi and you’ve paid. That will be the world of payments’

‘In the capital markets space, fintech will be just part of the way you do things. Right now, in this moment it’s best to choose the right partners and pick the best strategy possible.’

So there’s big change ahead…

Devie Mohan: ‘The way you work, the way you think of culture, innovation and partnering. All of this will change so drastically that you’re all innovating and working together. That is fintech’s legacy. We’ll look back and say 2012 was where it all began, where we starting doing things differently with innovation.’

Find out what Devie and Susanne had to say about what small businesses can do to prosper in the Experience Economy.